The project requires a 7000 working capital investment in

Reference no: EM13622834

1. Maritech purchased a pellet mill 4 years ago for $60000. The mill is being depreciated over 7years using MACRS. Maritech is planning to replace the mill with a higher volume unit that will cost $110000 installed. If the old mill can be sold for $25000, what is the tax liability? Assume a marginal tax rate of 40%. Use the rounded MACRS schedule listed below. (7-year depreciation schedule: 14%,25%,18%,12%,9%,9%,9%,4%) A)$7498

B)$2560

C)$3754

D)$16502

2. Ten-year ago J-Bar Company purchased a lathe for $225000. It was being depreciated on a straight line basis to an estimated salvage value of zero over a 15year period. The firm is considering selling the old lathe and purchasing a new one. The new lathe would cost $500000. The firm's marginal tax rate 40percent. Determine the intiial outflow(or net investment) required to purchase the new lathe, if the old lathe is sold for $100000.

A)$400000

B)$380000

C)418000

D)410000

3. Consider a capital expenditure project with an expected 10-year economic life and forecasted revenues equal to $400000 per year; cash expenses are estimated to be #29000 per year. The cost of the project equipment is $23000, and the equipment's estimated salvage value at the end of the project is $9000. The equipment's $23000 cost will be depreciated using MACRS depreciation (7-year asset). (7-year depreciation schedule:14%,25%,18%,12%,9%,9%,9%,4%) The project requires a $7000 working capital investment in year 0 and another $5000 in year 5. The company's marginal tax rate is 40%. Calculate the expected total(operating plus terminal) cash flow in year 10of the project.

Reference no: EM13622834

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